General Maritime Corporation Q3 2009 Earnings Call Transcript

General Maritime Corporation (GMR)

Q3 2009 Earnings Call

October 28, 2009 8:30 am ET

Executives

Brian Kerr – Investor Relations

John Tavlarios – President

Peter Georgiopoulos – Chairman

Jeff Pribor - Chief Financial Officer

John Georgiopoulos - Executive Vice President

Peter Bell - Head of Commercial Operations

Analysts

Doug Mavrinac – Jefferies & Company

Jon Chappell – JP Morgan

Natasha Boyden – Cantor Fitzgerald
Justin Yagerman – Deutsche Bank

Daniel Burke – Clarkson Johnson Rice

Rob MacKenzie – FBR Capital Markets

Scott Burk – Oppenheimer

Charles Rupinski – Maxim Group

Anders Karlsen – Nordea

Stephen Williams – Simmons

Presentation

Operator

(Operator Instructions) Welcome to the General Maritime Corporation Conference Call to discuss the Company’s 2009 Third Quarter and Nine Months Results. At this time I would like to turn the conference over to Mr. Brian Kerr.

Brian Kerr

Welcome, ladies and gentlemen, to the General Maritime Corporation conference call to discuss the company's 2009 third quarter and nine months results. I would like to remind everyone that this conference call is now being webcast at the company's website www.GeneralMaritimeCorp.com. There are additional materials related to our earnings announcement including a slide presentation on our website.

You should be aware that in today's conference call, we will be making certain forward looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward looking statements. For a discussion of factors that could cause results to differ, please see the company's earnings press release that was issued yesterday and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Annual Report on Form 10-K for the year ended December 31, 2008, and in subsequent reports on Form 10-Q and Form 8-K.

All share and per share amounts discussed in this conference call, unless otherwise noted, have been adjusted to reflect the exchange of 1.34 shares of our common stock for each share of common stock held by shareholders of General Maritime subsidiary, our predecessor company, in connection with the Arlington acquisition.

Now I’d like to introduce Mr. John Tavlarios, President of General Maritime Corporation.

John Tavlarios

Welcome to General Maritime’s earnings conference call for the third quarter and nine months of 2009. With me today are Peter Georgiopoulos, Chairman, Jeff Pribor, Chief Financial Officer, John Georgiopoulos, Executive Vice President, and Peter Bell, Head of Commercial Operations.

As outlined on slide three of the presentation, I’ll begin today’s call by discussing the highlights of the quarter and year to date followed by Jeff’s review of our financial results for the three months ended September 30, 2009. Following this, I’ll provide some remarks on our company outlook, with an overview of the industry. We’ll then be happy to take your questions.

I’ll begin on slide four. During the third quarter General Maritime continued to benefit from its sizeable time charter coverage enabling the company to once again record profitable results despite a challenging freight environment. Consistent with its focus on continuing to post stable and visible earnings regardless of tanker spot rates, Maritime opportunistically entered into long term time charter contract for six double hull vessels during the third quarter and current fourth quarter.

In terms of our third quarter financial performance, we recorded net income of $14.8 million or $0.27 basic and diluted earnings per share. Third quarter results included other income which Jeff will discuss later on the call when he review our financial results. Excluding other income, we recorded adjusted net income for the third quarter of $1.6 million or $0.03 basic and diluted earnings per share.

For the nine months ended September 30, 2009, we recorded net income of $40.9 million or $0.75 basic and $0.74 diluted earnings per share. Based on our financial performance for the third quarter we believe that General Maritime is well positioned to meet its quarterly dividend target of $0.125 per share. As we highlight in our earnings press release, the company’s Board of Directors intends to declare the third quarter dividend of $0.125 per share following the closing of the qualified notes offering.

We required qualified notes offering by November 30, 2009, in order for the main provisions of the amendment to our 2005 credit facility to take effect. We cannot comment on how we expect to fulfill this condition so we won’t be taking questions on that subject.

I would like to briefly review our agreement to amend the company’s 2005 credit facility. While Jeff will discuss specific terms of the agreement later on the call, I’d like to highlight that proactively with our banks to amend our credit facility, our goal was to inflate the company from short term volatility in asset prices and preserve General Maritime’s long term financial strength and flexibility. We appreciate the support we continue to receive from our banking group which we believe underscores General Maritime’s industry leadership and prospects for the future.

On slide five we detail the company’s dividend policy. As mentioned before, the Board intends to declare a third quarter 2009 dividend upon the completion of a qualified notes offering. On slide six we detail our current contract coverage. The company has 21 vessels under fixed contracts representing 68% of its fleet and 42% of estimated operating days for 2010.

As I mentioned earlier on the call, the company recently signed or extended long term contracts for six of our double hull vessels. Importantly these contracts were secured at rates that we estimate to be consistent with or better then the market. Some of the contracts also included profit sharing agreements which are intended to provide the company with the ability to benefit from an improving rate environment in the future.

Turning to slide seven we included a chart that details our time charter coverage. Included these six new or extended charters, General Maritime has total contracted revenue of approximately $110 million for 2010 and $240 million for the current year. Of note, all our contracts continue to be backed by leading oil companies and traders such as Exxon Mobil, LUKoil, Shell, Concordia, Stena, and others.

We believe that our success in continuing to attract world class charters is a direct result of General Maritime’s reputation for providing customers with a modern fleet that meet stringent operational standards. Going forward, we intend to remain diligent in acting opportunistically for shareholders and implementing our flexible fleet deployment strategy with a focus on operating a sizeable portion of our fleet on contracts with high quality counterparties.

We believe our deployment strategy positions the company to maximize cash flow by achieving a level of stability in its results in diverse rate environment as well as preserving the ability to benefit from improving tanker rates in the future.

I would now like to turn the call over to Jeff Pribor.

Jeff Pribor

Beginning on slide nine I would like to review our third quarter financial results. For the third quarter 2009 the company recorded net income of $14.8 million or $0.27 basic and $0.27 diluted earnings per share for the three months ended September 30, 2009 compared to net income of $23.5 million or $0.60 basic and $0.59 diluted earnings per share for the three months ended September 30, 2008.

Excluding other income, the company recorded net income of $1.2 million or $0.03 basic $0.03 diluted earnings per share for the three months ended September 30, 2009. The company excludes other income from net income as a method of analyzing the cash impact of its net income. Other income, which primarily includes an accelerated amortization of the net time charter liability related to four Stena vessels for which options to extend time charters were not exercised, and which will therefore be redelivered to the company earlier then anticipated, was $13.1 million for the quarter ended September 30, 2009.

To analyze revenue we look at net voyage revenue per vessel day referred to as time charter equivalent or TCE. TCE is calculated by dividing net voyage revenue by voyage days for the applicable time period. To find the total number of voyage days used in this computation in the appendix to our press release.

On slide 10 we provide a third quarter 2009 TCE analysis. Full fleet TCE including time charters fell to $23,136 per day for the quarter ended September 30, 2009, compared to $37,651 for the prior year period. The TCE earned by our Suezmax vessels decreased 19.6% to $31,713 from $39,452 in the prior year period. Our Aframax vessels decreased by 62.6% to $13,972 for the quarter ended September 30, 2009, from $37,347 for the prior year period.

The company’s total average daily spot rate decreased 87.2% to $5,677 compared to $44,427 in the prior year period. For the quarter ended September 30, 2009, EBITDA was $44.7 million compared to $44.1 million for the quarter ended September 30, 2008. Depreciation and amortization for the quarter ended September 30, 2009, was $22.2 million compared to $14.2 million for the quarter ended September 30, 2008. This increase is primarily attributable to the deliver of the Arlington fleet of vessels since the prior year period.

Our net interest expense increased to $7.7 million during the quarter ended September 30, 2009, compared to a net interest expense of $6.4 million for the prior year period. The increase in interest expense is primarily due to our increased debt position from the Arlington transaction, offset by lower interest rate environment.

I’d now like to discuss our balance sheet which is detailed on slide 11. As of September 30, 2009, our cash position was $22.3 million and our debt was $955.5 million.

Turning to slide 12, we provide a third quarter 2009 operating expense analysis. To analyze expenses we look at the cost per vessel day which adjusts for changes in the size of our fleet. Per vessel day costs are calculated by dividing total expense by the aggregate number of calendar days that we’ve owned each vessel during the period. Daily direct vessel operating expenses decreased by 2.5% to $7,923 per vessel day for the quarter ended September 30, 2009, compared to $8,122 for the prior year period. The decrease was attributable to decrease in costs of the VLCC, Suezmax and Panamax vessels offset by an increase in costs on our Aframax vessels due to increased maintenance and repair.

General and administrative expenses decreased by $0.9 million to $9.5 million for the quarter ended September 30, 2009, compared to the prior year period. The primary reasons for the decrease were a reduction in personnel costs in our New York office and the elimination of costs associated with operating our corporate aircraft.

Our outlook for the remainder of 2009 is detailed on slide 13. We have not changed our estimates for daily direct vessel operating expense. Our guidance still remains at approximately $8,150 per day for Aframax vessels and $8,200 per day for Suezmax vessels. These amounts represent an increase over 2008 actual expenses and are attributable to increases costs experienced industry wide associated with accruing insurance and maintenance and repair.

We expect our remaining three months G&A for 2009 to be $9.5 million. Of the total of $9.5 million in the G&A expense $7 million is cash expense with the balance of $2.5 million being amortization of restricted stock which is a non-cash expense. We project approximately $22.3 million in depreciation and amortization for the remainder of 2009.

For the remaining three months 2009 we have a total of two drydocks remaining, one Suezmax vessel and one Aframax vessel. These drydocks have approximately 142 associated offhire days. Total costs associated with our total 2009 drydocking program are anticipated to be $21.5 million and costs of $6.5 million are budgeted for the capital improvement of our fleet.

On slide 14 we provide a description of our dividend history. The company has a new dividend policy with an annual target dividend of $0.50 or $0.125 quarterly. We are pleased to have been able to declare dividends of $22.62 [inaudible] in May 2005 including a one time special dividend of $11.19. The company intends to declare a third quarter 2009 dividend following the completion of the qualified notes offering.

I’d like to conclude my remarks on slide 15 by going through an overview of our recently announced bank amendment. Pursuant to this amendment the 2005 credit facility will be amended to, among other things:

Reduce the commitment under the 2005 credit facility to $749.8 million, the results of which the next scheduled reduction in total commitment will be April 2011.

To amend the net debt to EBITDA maintenance covenant to increase the permitted ratio to 6.5:1 through and including September 30, 2010, then to 6.0:1 from December 31, 2010, until September 30, 2011, and 5.5:1 thereafter.

To amend the collateral vessel appraisal reporting from annually to semi-annually.

Restrict the company’s dividends to no more than $0.125 per quarter.

Increase the applicable interest rate margin over Libor to 250 basis points from 100 basis points today.

Permit subsidiary guarantees in a qualified notes offering.

Waive the minimum cash balance requirement for September 30, 2009. Due to an unanticipated delay in the customer payment at quarter end, the company did not meet minimum cash balance requirements as of September 30, 2009.

The effectiveness of this amendment, other than the waiver of the minimum cash balance, which became effective upon the signing of the amendment yesterday, is contingent on certain conditions precedent set forth therein, including the consummation prior to November 30, 2009, of an offering of non-amortizing senior unsecured notes with a minimum tenor of five years in which the company raises a minimum of $230 million of net proceeds, which is referred to today as a qualified notes offering.

That concludes my remarks. Now I’d like to turn the call back over to the President, John Tavlarios.

John Tavlarios

Turning to slide 17 we will now discuss the company outlook. During the third quarter and nine month period General Maritime has continued to maintain an intense focus on insuring that it effectively manages the company’s assets through the shipping cycles. Complementing this prudent approach we have also concentrated on taking steps to preserve our financial strength and flexibility. We believe that General Maritime remains well positioned to continue to achieve both of these crucial objectives over the long term.

In addition to maintaining significant time charter coverage and providing visible and consistent revenue and earnings stream to shareholders, we are committed to looking for further opportunities to enter into value creating transactions. Growth remains a core component of our long term strategy and we intend to continue to actively seek additional acquisition opportunities that meet our strict return criteria as we have done in the past.

Specifically, we intent to pursue transactions that have the potential to further expand the earning power of our modern high quality fleet, enhance our industry leadership, and create enduring value for the company and its shareholders.

In addition to implementing our long term growth strategy we intend to continue to maintain unrelenting commitment to effectively redeploy General Maritime’s cash flow to maximize returns to shareholders. As part of this effort we plan to continue our $0.50 per share annual fixed dividend target, consistent with our existing dividend policy. We also intend to utilize our cash flow to further reduce debt until the right acquisition opportunities are identified.

Turning to slide 18 I’d like to briefly discuss current market conditions. With 29% of our available spot days booked for the fourth quarter our Aframax fleet is averaging $7,000 per day. With 47% of available spot days booked for the fourth quarter our Suezmax fleet is averaging $17,500 per day. Current Aframax TCE rates worldwide are around the $5,000 per day range while TCE rates for Suezmax and VLCC tankers are around $27,000 per day.

Turning to slide 19 we give a brief industry outlook. The effects of the global recession, continued implementation of OPEC quarter cutbacks, and the significant order book continue to make themselves felt during the third quarter as they did in the second quarter. Rates were near their yearly lows at the beginning of the quarter, bottomed in late July and remained in a narrow trading range near cash cost levels for the remainder of the quarter.

Although OPEC compliance continues to slip, OPECs production cut to right size inventory levels nevertheless continue to depress tanker demand. On the supply side, deliveries on the year continue significantly add to supply. Looking ahead to the rest of the fourth quarter and 2010 a consensus has developed among the IEA and others on the declining global oil demand for 2009, in the range of 1.7 to 1.9 million barrels per day or 2% to 2.3%.

While this continues to depress tanker demand, these estimates have actually been reduced from as much as 2.5 million barrels per day decline on a few months ago. This fundamental demand decline is partially mitigated by floating storage which is estimated to be 65 million barrels of products and 45 million barrels of crude.

OPEC production costs officially have stood 4.2 million barrels per days since September 2008. However, compliance has continued to slip from an estimated 66% in July to 62% in September making effective cuts around 2.6 million barrels per day.

We view recent price movement breaking the $75 per barrel range as a promising step because the beginning of production cut reversals. Inventory levels peaked in July and should continue to draw from peak levels moving further into winter heating season. While we expect tanker demand rates to remain at low levels, in absolute terms the remainder of 2009. We believe we will see continued improvement in the fourth quarter as a result of seasonal influences and further inventory draws.

On the supply side 2009, as expected, has been an unprecedented year for net tanker deliveries. Expectations for 2009 fleet growth were initially 14%, illustrating an increasing likelihood of some deliveries slippage into 2010. Scrappings have thus far been minimal on the year and while increasing late in the third quarter to date they have not been sufficient to offset increasing supply. However, improvements in dryboat rates are promising as this brings back conversions as an exit strategy for single hull tankers.

Moreover, the impending IMO deadline on single hull tankers should accelerate tanker demolition in conversions in late 2009 and 2010. This deadline and current rate environment may create conditions in which owners of single hull and first generation double hull tankers scheduled for drydocking in late 2009 and 2010 have strong reason to consider removing vessels from service.

As we move into 2010 factors such as recovering energy demand and supply reduction will have their effect on the market. In the near term, until relatively high inventories of crude and products, including those in floating storage are drawn, recent upward oil price movement will provide incentive for both continued OPEC compliance declines and the beginning of OPEC production cut reversals possibly as of December 22, 2009, summit. As a result, we believe conditions may improve moderately in the fourth quarter and that a turnaround in mid 2010 leading to a significantly better rate environment is a very credible scenario.

Most importantly, to our shareholder, whatever the slope of the curve, General Maritime remains well positioned, having 76% of its operating days covered for 2009 and 42% currently for 2010. This enables us to maintain a strong balance sheet, pay down debt, and take advantage of acquisition opportunities which we expect will come with a trough of the market.

At this point we’d like to open the call up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Doug Mavrinac – Jefferies & Company

Doug Mavrinac – Jefferies & Company

I had a few follow up questions. The first couple have to do with some of the new time charters that were announced. On the Aframax you guys entered three new time charter contracts. I’m curious do you view that as more of a strategic change for General Maritime in that you’re preferring to have more time charter coverage across the fleet inclusive of the Aframax? Or is it more opportunistic saying Aframax rates are $5,000 a day and had a chance to put these things away at $17,500 a day which is fantastic? How would you characterize the thought process in fixing some of those Aframax?

Peter Bell

I think its sort of both. A couple years ago when we started to get nervous about the market we started putting more ships away on period charter. That’s sort of been the policy for the last couple years. Then I know it’s been mostly Suezmax but it wasn’t that we didn’t want to put Aframax away its just that was the balance. I think it’s a matter of keeping with that policy and being opportunistic as you said, in the second part of your question.

Doug Mavrinac – Jefferies & Company

Looking at the VLCC that was also put away it looks like Stena did not renew but you guys were able to secure time charter contract right that was even better then the Stena rate. The question is, would you characterize that as a market rate and that’s what we could maybe even expect on the other VLCC? Or is there something particular about this one time charter contract that enabled you guys to get an even better rate then the expiring rate?

Peter Bell

I think it was opportunistic. We got a good rate and we were opportunistic on that one.

Doug Mavrinac – Jefferies & Company

This one has to do with the announcement related to the credit facility and the upcoming qualified notes offering. Not talking about the transaction itself but more of what General Maritime is going to look like after all is said and done in terms of how do you guys view General Maritime’s positioning in the capital structure and your ability to take advantage of what potentially could be as John alluded to in his comments, potentially much better market a year from now.

John Tavlarios

You said it right, as John said earlier, we can’t talk about a potential senior notes offering. What we did say in the press release is that we have a bank amendment after which a little bit higher costs Libor spread but we have a dividend that we keep and we have an amended covenant package so no questions there, that’s in good shape. All I can say is that the press release says that we will have an amendment completed capital structure in which there will be a unsecured senior note.

Doug Mavrinac – Jefferies & Company

The gist of the question was you guys won’t have any debt due until April 2011 so you’ll be able to take some of the cash flow you’re generating pay that down. What sort of dry powder could you have under the amended credit facility to maybe take advantage of acquisition opportunities that come up?

John Tavlarios

I really have to be careful because the rules are about not talking about it, the size of the notes, I can’t talk about. You are correct in saying that we will have no more amortizations on the $850 million facility until April 2011. That clearly does open up flexibility under that facility.

Operator

Your next question comes from Jon Chappell – JP Morgan

Jon Chappell – JP Morgan

You didn’t have the slide this time around that had the break even cost analysis. I’m wondering would that 42% time charter coverage you had for 2010 what’s the fixed cost coverage of that. I was trying to get to what your free cash flow might look like next year.

Jeff Pribor

We provide fixed cost, you’re talking about 2010? We’re not really quite ready to give that exact number yet because haven’t’ finished our budget for 2010. I can tell you that roughly speaking that the 42% in days that we had is close to 70% of fixed cost coverage defined as what we expect cash and G&A to be, interest expense, maintenance CapEx and vessel expense on the time charter ships.

Jon Chappell – JP Morgan

You made mention in the press release about a late paying counterparty. I’m trying to figure out what the exposure is there. Can you say how many ships? What the dollar amount might be and is it something that’s been rectified since quarter end?

John Tavlarios

As it said in the press release we just had one of our counterparties just paid a little bit late. It was one day late in fact. It was that simple. We have a number of revenues that come in on time charter, I can’t give you an exact amount its just one of those things that happens.

Jon Chappell – JP Morgan

With the potential for some of the ships as far as being used as collateral being freed up if you do, do some unsecured notes, as we look at the fleet list there’s still a few early to mid-1990s built tonnage in there. Have you given any thought to modernizing the fleet by disposing that and potentially adding to your liquidity?

Peter Bell

I think now is not the time to dispose of ships. I think now is the time to look to buy things over the next year or so. If we had more liquidity we would buy stuff and these things would get sold sometime in the future.

Jon Chappell – JP Morgan

You said in the past that we’re not quite there, ready to buy yet. You just said within a year or so but do you think we’re closer to that point now?

Peter Bell

We’re definitely closer.

Operator

Your next question comes from Natasha Boyden – Cantor Fitzgerald

Natasha Boyden – Cantor Fitzgerald

As you said, you can’t talk specifically to the notes, but can you perhaps give us your assessment of the higher bond market at the moment and whether or not you anticipate perhaps any difficulty raising your required amount to the reasonable rate?

John Tavlarios

I think its better just to not talk about the market at all. It’s a very reasonable question but I think we should just stay away from that. It’s a market that’s available to us as we said before.

Natasha Boyden – Cantor Fitzgerald

Can we move over perhaps to the dividend, the amendment allows you to continue paying $0.125 a quarter? How comfortable are you with your ability to continue paying this if conditions in the tanker market remain weak for another 6 to 12 months?

John Tavlarios

We picked this new dividend amount at the time of the last quarterly call. We kept it through this bank amendment process because the company and the Board felt and continue to feel that an amount we can continue to pay so we’re comfortable.

Natasha Boyden – Cantor Fitzgerald

Looking at the Stena ships the Victory was delivered on the 12^th and it looks like the Vision and the other Stena options were not exercised. Can you talk about perhaps your charter strategy for those going forward? Are you going to continue looking for time charters, are you going to put them on the spot market for a while, what are you going to do with them?

John Tavlarios

Right now we’re on the spot market on the Vision and then we’re going to continue to look for opportunities. We’ve continued to talk to people but it’s opportunistic again. We found a good opportunity with the Victory, it was the right fit and we fixed the vessel out and I think we’re going to do the same thing with the Vision.

Operator

Your next question comes from Justin Yagerman – Deutsche Bank

Justin Yagerman – Deutsche Bank

I know you can’t talk about the senior secured offering but can you talk about what assets you have left to collateralize and how much you think the value of those are?

John Tavlarios

No. I don’t think we ever discuss the value of our fleet.

Justin Yagerman – Deutsche Bank

Can you talk about what you have to collateralize? Obviously a considerable amount of the fleet is already mortgaged. What are the assets that we’re talking about when we’re talking about a secured note?

John Tavlarios

It’s an unsecured note, as the press release says. It’s an unsecured note that’s a minimum amount of $230 million. If you look in our capital structure you can work it out. There’s nothing more to say about it now. If you have an unsecured note to pay down debt then that can open up possibilities.

Justin Yagerman – Deutsche Bank

Thinking about the collateral maintenance test, what’s the impetus here for moving from an annual to a semi-annual? How does that give you guys any more flexibility. I would assume that that actually gives you a little bit less? Can you comment at all on where you think you are right now from a collateral maintenance standpoint?

John Tavlarios

I can’t comment on that last part. The other part really just ministerial we were the ones on an annual basis so we didn’t have another collateral maintenance certificate required until the end of the year deliverable in March 2010 as part of this process the bank said they’d just like in the future to maybe have it twice a year and we thought that was reasonable.

Justin Yagerman – Deutsche Bank

Is that charter free or is that on a charter basis. How are they looking at that?

John Tavlarios

As with most companies evaluation on a charter free basis.

Justin Yagerman – Deutsche Bank

I was hoping maybe you guys could comment a little bit about you’ve talked about you’re going to be opportunistic about how you charter your vessels. What you’re seeing I guess right now in the market where you see the market for the VL, the Afra, the Suez because if you’ve still got 42% coverage for 2010 where are things if you were to charter them today?

Peter Bell

Where are they per class is that the way you want to know?

Justin Yagerman – Deutsche Bank

Where are you seeing time charters offered right now on maybe a one and three year basis on the various asset classes?

Peter Bell

If you look at the VLCCs depending upon whether you’re one year or three years you’re probably 30 and above depending on whether you’re one or three years, whether there’s profit sharing involved or not. Suezmax’s just below 30 I would say for the same period of time. Aframax is probably somewhere in the upper teens and a little more then 20.

Justin Yagerman – Deutsche Bank

How’s the liquidity in those markets right now?

Peter Bell

It’s very thin and as we said earlier we’re sort of picking our spots and looking for the right opportunity.

Operator

Your next question comes from Daniel Burke – Clarkson Johnson Rice

Daniel Burke – Clarkson Johnson Rice

With regard to the amendment just for clarification, collateral maintenance is still set I assume at 125% and I also wanted to clarify in the negotiations you’ve maintained what I think is your single remaining unencumbered vessel if you didn’t pledge that as the negotiations went on did you?

Jeff Pribor

You said it right at the beginning of your question. The collateral maintenance clause will remain in place. Nothing’s changed other then that we will be sure to provide cheap enough collateral to be in compliance. Everything about the amendment is in the press release. Nothing else is in the negotiations.

Daniel Burke – Clarkson Johnson Rice

One practical, near term market based question. Going back to the two VLCCs which I guess are operating in the spot market here, particularly the Victory has got to meet a pretty narrow spot window before going back on time charter. Any early indications on what type of realizations you’ll be able to drive on those two vessels during Q4?

Peter Bell

The Victory is not in the spot market, she’s delivered. The Vision is in the spot market now, we’re assessing whether we had East or West with that ship at this point I would say off the top of my head if we fixed the ship today we’d probably earn something in the neighborhood of $27,000 or $28,000 a day on the spot voyage for her.

Operator

Your next question comes from Rob MacKenzie – FBR Capital Markets

Rob MacKenzie – FBR Capital Markets

I had a follow up on the cost guidance going forward. You say you’ve taken some direct operating costs out here in the third quarter. How should we think about that beyond the fourth quarter into next year? How much do you think you can further take out of direct vessel operating expenses as 2010 goes on?

Jeff Pribor

I think what you said is that we actually reported a decrease in direct vessel operating expenses versus last year and you probably heard it was lower then the prior quarter. Then we also went ahead and said that we took guidance for Q4 we’re sticking with our yearly budget. Really we’re saying that we’re lower this quarter but stick with the budget for this year. Going to next year we haven’t completed our budget yet. When we have we’ll give guidance on that.

Rob MacKenzie – FBR Capital Markets

The moving parts there in terms of the direct vessel operating expenses do you think the market is there where its possible to achieve a further reduction next year or is it more likely that we see those flat to maybe even up?

John Tavlarios

The entire market is under pressure right now. I think if you’re looking at the key variable right now is crewing and I think that’s something we’re evaluating where we’re going to be in our budget for 2010 and we’ll give guidance on it. There’s obviously pressure on that number.

Rob MacKenzie – FBR Capital Markets

Any color you can give us on 2010 drydock or is it just too early in the budget process still?

Peter Bell

I think it’s too early at this time. Other then the vessels that will be drydocked which are five. As far as the number is concerned it’s a little too early for that.

Rob MacKenzie – FBR Capital Markets

How liquid the market is for tankers right now and how liquid you think it will be in order to make accretive acquisitions and additions to your fleet. To date it’s been fairly limited numbers of ships trading hands. What makes you think that that will meaningfully change going forward and why and when do you think and from where do you think a lot of these vessels may come available?

Peter Bell

Why we believe it is out of past experience. You had a financial collapse 12 months ago, its taken time to work its way through the system. I think as you look into next year people have liquidity issues and financing issues on new buildings I think that’s where you’ll start seeing opportunities.

Rob MacKenzie – FBR Capital Markets

Do you think the banks will be more aggressive then with people in violation of covenants when renegotiations come up again, will it be partly that or is it going to be more of people just cant’ fund the new builds and have no choice but to default on them?

John Tavlarios

I think its “B”. I don’t think the banks are going to be much more aggressive. If you’ve got the government guaranteeing your portfolio why should you be aggressive and start selling things. With all these governments around the world supporting the banks I don’t think you’ll see the banks be very aggressive. I think what you will see is people can’t pay for their new buildings, that’s where the opportunities will come from.

Rob MacKenzie – FBR Capital Markets

That comes full circle back to the public bond market and questions surrounding your offering perhaps afterwards. How do you see the availability of the public debt market is that going to be in your mind restricted to a couple of the more blue chip reputable names or do you think that could be more widely available for ship owners?

John Tavlarios

My hope is that’ll be to the better names. You never know in this world. Ten years ago I would have thought the same thing and you saw a bunch of bad people do bond deals. I would hope the market has learned its lesson. Seems to me that it doesn’t always learn its lesson. You’d hope it would be some of the better companies, the ones that behave but what happens is investment bankers get greedy. Its starts off at the top companies then investment bankers get greedy, they start pitching it down, down, down the scale and stuff gets sold. What can you do?

We think its important alternative because we think there’ll be limited bank availability next year for everybody. The banks aren’t lending as much and I think that’ll continue into next year. This is another avenue for us to strengthen our balance sheet.

Operator

Your next question comes from Scott Burk – Oppenheimer

Scott Burk – Oppenheimer

I had a question about the covenant change being dependent on the notes offering. The main question is could you raise capital a different way like through the equity markets or does it have to be a bond offering?

Jeff Pribor

It’s pretty straightforward in the press release and the K that the amendment will become effective on the completion of notes offered before November 30. If for any reason that didn’t happen as the press release says, we’ll probably go back and look at other alternatives, but primarily just amending the facility. It is just what you see there.

Scott Burk – Oppenheimer

You mentioned that the late payment was just delayed by one day and that you’ve now received the payment from the charter. What’s your cash balance now pro-forma today as opposed to September 30?

Jeff Pribor

We don’t give the number except on the quarter. Obviously we got the money in. We’re in compliance with our. Banks requires at least $25 million so more then that.

Scott Burk – Oppenheimer

I had a question about the charters you got on the three Aframax, Ajax, Minotaur, and Strength. There’s a pretty big discrepancy, you got a rate of $17,000 or $18,000 a day that seems pretty consistent with the charter market benchmarks like Clarkson’s but quite a bit above the current FFA market is. Could you discuss the differences between those two markets, why there’s such a big discrepancy between the below $10,000 a day numbers we’re seeing in the FFA markets and what you’re able to get on those one year charters?

Peter Bell

A lot of it has to do with liquidity and what these ships are being and what trades they’re being employed in and the Strength it’s got some lightering involved in it she’s also a more modern ship she gets a premium for those things.

John Tavlarios

We’ve said this many times before, you can’t look at the FFA market and believe that that’s what the market is. It’s an illiquid market and I just don’t think that it’s a real indicator of where the market is whether it’s the spot market or the time charter. We’ve said this many times before and people fall into the trap of looking at the FFA market. I don’t think you can look at it like you look at oil futures markets and things like that. Its just not as developed yet, its not there yet.

Scott Burk – Oppenheimer

Your point is to the liquidity point, there’s not enough liquidity there to make that a good benchmark?

Peter Bell

Exactly.

Scott Burk – Oppenheimer

The only reason that I continue to look at it, or I think it is useful to look at, is we do at least get a daily print on that whereas the charter market you don’t necessarily get a daily print.

John Tavlarios

I know that but you’ve got to look at it in context of the fact that it’s not a really good number. Then you’ve got to think what does it give me.

Scott Burk – Oppenheimer

On the acquisition front you talk about your liquidity increasing post the bond offering and also having more opportunities next year as new buildings deliver. Do you anticipate that pricing for tank second and tankers and new building deliveries to decline significantly going into next year or do you think we’ve stabilized in pricing and you’re just waiting to build liquidity to start pulling the trigger?

John Tavlarios

I think it’s declined significantly and I think we’re getting close to that place where it’s flattening out.

Operator

Your next question comes from Charles Rupinski – Maxim Group

Charles Rupinski – Maxim Group

I had a market question on the single hull phase out. We haven’t had a lot of scrapping yet and I’m interested in your take on how many of these single hulls may trade past 2010 and particularly how it pertains to some, I’m talking about overall new trade route say from South America to the Far East. Do you have a view on that? Do you think that there’s going to be more or less then people are thinking about potentially single hulls trading down 2010?

Peter Bell

September was actually a big month for scrapping. It’s fallen off a little bit since then but we’ve seen quite a lot of scrapping in September including three VLCCs. As far as the trade routes go, we’ve got a more modern fleet that’s delivering now and whether these ships trade past 2010 depends upon the states that they’re going to and what they’re hauling. I personally don’t see it; I think these ships go out. It’s as much driven by economic reasons as it is by regulatory.

Operator

Your next question comes from Anders Karlsen – Nordea

Anders Karlsen – Nordea

On the OPEC side I know that you said you hadn’t finished a budget yet but the Stena vessels had fixed OPEC now they’re coming out as charters. Do you foresee that OPEC are coming out next year?

John Tavlarios

The Stena numbers had been a fixed number since the charters were put into place. They’ll be some sort adjustment considering that those were done a few years ago. There will be some adjustment, exactly what that number is I don’t know it’s too soon to tell.

Anders Karlsen – Nordea

We can just assume its going up to the VLCC levels that you see on all the type vessels?

John Tavlarios

I would say in general it’ll average out with the rest of the fleet is.

Operator

Your next question comes from Stephen Williams – Simmons

Stephen Williams – Simmons

Given where the levels of the new time charters are interest expense quite a bit higher next year. Are you intending to maintain the dividend? It kind of looks to me like free cash flow to strengthen the balance sheet is actually not that significant and certainly not compared to the level of depreciation you see on your existing assets. At the same time you’re obviously still talking about opportunities to make acquisitions. Is it really feasible to be talking about maintaining the dividend policy and talking about expansion at the same time?

John Tavlarios

Yes.

Operator

It appears that we have no further questions. At this time I would like to turn the call back to our speakers for closing remarks.

John Tavlarios

Joe Maritime’s strategy of securing a significant percentage of its fleet and operating days on long term contracts continues to serve the company well. With our recent success signing long term contracts for six double hull vessels we have further enhance General Maritime’s earnings, visibility regardless of the rate environment. We’ve also acted proactively to position General Maritime to increase its financial strength and flexibility while insulting the company from short term volatility and asset prices. Complementing our dividend policy we remain committed to seeking opportunities to enter into future value creating transactions for shareholders and further grow the company over the long term.

I’d like to thank everyone for participating in today’s call. We look forward to providing you an update in the future.

Operator

This does conclude today’s teleconference. Thank you for your participation. You may disconnect at any time.

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